Fri, Oct 12, 2018 - Page 10 News List

IMF’s Lagarde warns against trade wars

Reuters, NUSA DUA, Indonesia

IMF managing director Christine Lagarde chats with delegates during the IMF and World Bank annual meetings in Nusa Dua, Indonesia yesterday.

Photo: AFP

IMF managing director Christine Lagarde yesterday warned countries against engaging in trade and currency wars, saying these would hurt global growth and imperil “innocent bystanders.”

Formally launching the IMF and World Bank annual meetings on Bali, Lagarde urged countries to “de-escalate” trade conflicts and fix global trading rules instead of abandoning them.

The US and China have slapped tit-for-tat tariffs on hundreds of billions of dollars of each other’s goods over the past few months, rattling financial markets as investors worry that the escalating trade conflict could knock global trade and investment.

Share markets in Asia plunged to a 19-month low yesterday after Wall Street’s worst losses in eight months led to broader risk aversion, partly due to the heated global trade tensions, as well as rapidly rising US dollar yields.

“We certainly hope we don’t move in either direction of a trade war or a currency war,” Lagarde told a news conference. “It will be detrimental on both accounts for all participants, and there would also be lots of innocent bystanders,” including countries that are part of China’s supply chain.

In the past few weeks, US Department of the Treasury officials have expressed concerns about China’s weakened yuan as the department prepares its semi-annual report on currency manipulation.

US President Donald Trump has accused China of deliberately manipulating its currency to gain a trade advantage, claims Beijing has consistently rejected.

US Secretary of the Treasury Steven Mnuchin yesterday met with People’s Bank of China Governor Yi Gang (易綱) on the sidelines of the IMF-World Bank meeting.

“We discussed important economic issues,” Mnuchin said of their meeting on Twitter.

Lagarde yesterday weighed into the debate, saying that yuan weakness against the US dollar was driven by the greenback’s strength as the US Federal Reserve hikes interest rates.

Against a basket of currencies, the yuan has depreciated less.

“We have supported the move of China towards [currency] flexibility and we want to encourage the authorities to continue on this path going forward,” she said.

The yuan has faced strong selling pressure this year, losing over 8 percent between March and August at the height of market worries, although it has since pared losses as authorities stepped up support measures.

Lagarde later said that she believes Chinese authorities are taking steps to maintain growth, stability and investor confidence amid the trade conflict, but face a “complicated” balancing act to keep its fiscal situation under control

World Bank president Jim Yong Kim also warned against an escalation of the trade row, saying that the development lender’s agenda depended on strong trade flows and that there would be a clear hit to growth if all countries followed through on their trade threats.

The meetings, attended by more than 19,000 delegates, showed no sign of disruption from an offshore earthquake early yesterday morning between Bali and Java that killed three people and damaged some buildings.

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